Atlantic City lives to spend another day in cash crisis

Atlantic City retained control over what little cash it still has on hand Friday, as a judge rejected an attempt by Gov. Chris Christie's administration to freeze the city's assets until it pays the school system what it owes. (WPVI)

Atlantic City retained control over what little cash it still has on hand Friday, as a judge rejected an attempt by Gov. Chris Christie's administration to freeze the city's assets until it pays the school system what it owes.

Hours after the city made a payroll payment that the state initially sought to block, the state Education Department asked a judge to prevent the city from spending any more money until it makes an $8.4 million payment to the schools, which are due $34 million by the end of the school year.

But Superior Court Judge Julio Mendez refused, giving both sides until April 19 to try to work out a deal.

"I wish I had a magic wand here today and I could fix this problem," Mendez said. "It seems to me the bottom line here is that there's not enough money."

That could be the city's new slogan, as it lurches from one financial crisis to the next. It owes its top casino, the Borgata, over $170 million in tax appeals. It has a budget deficit of anywhere between $30 million and $100 million, depending on who is answering, and efforts to help it - while giving the state control over the city's finances - are stalled in the Legislature.

As of Friday, it had about $8 million in cash on hand, City Finance Director Michael Stinson said.

The crisis is due largely to the contraction of the city's casino industry, which has seen its revenue fall from $5.2 billion in 2006 to $2.56 billion last year. In 2014, four of its 12 casinos closed.

But Christie and other state officials also say the city has spent well beyond its means for decades. Christie had the state sue the city earlier this week, trying to block it from making payroll payments before turning over money it owes the schools. The city must make an $8.4 million payment to the schools on April 15.

Dan Dryzga, an assistant attorney general, told the judge the city is legally obligated to hand over that money, raised from property taxes intended for the schools.

"At the core of this case is a Constitutional imperative that puts the children of Atlantic City first," he said. "They must be first because the money has already been collected by the city of Atlantic City for the school children of Atlantic City. It rightfully belongs to them."

The judge said there is no easy solution.

"I feel for the little people in the schools, and I feel for the little people in the city," the judge said. "I'm aware that most of them make $25,000, $30,000 a year. These folks have to pay their bills and eat. There's irreparable harm to go on all across the board here."

City and school officials hinted they may consider a temporary deal for partial payments.

"We've been doing that before," said school board president John Devlin. "That would be nothing new."

Devlin said there is a distinct political undertone to the case, citing Christie's stalled effort to get a takeover bill passed. Assembly Speaker Vincent Prieto introduced his own takeover proposal on Thursday that would give the city at least two more years to improve.

"They can't get what they want through the Assembly, so they're trying to get what they want through the school system," Devlin said.